Employment data cheer bulls in broad rally - PeopleSoft, Intel take center stage

CBS.MarketWatch ^ | June 6, 2003 | Steve Gelsi, CBS.MarketWatch.com

[Ernest_at_the_Beach]

MARKET SNAPSHOT

PeopleSoft, Intel take center stage
Employment data cheer bulls in broad rally

By Steve Gelsi, CBS.MarketWatch.com Last Update: 11:38 AM ET June 6, 2003

NEW YORK (CBS.MW) -- The Nasdaq rallied and the Dow jumped more than 100 points Friday as a $5 billion hostile takeover bid from Oracle, a solid profit forecast from Intel and the latest U.S. employment data stoked buyers.

During the session, the S&P 500 rose broke above the 1,000 mark for the first time in a year, and the Nasdaq closed in on 1,700, a level not seen since May, 2002.

Setting the bullish tone, Oracle (ORCL: news, chart, profile) offered $5.1 billion for business software firm PeopleSoft (PSFT: news, chart, profile). See full story.

Investors also cheered the latest U.S. jobs report, in which 17,000 people lost jobs in May, fewer than the expected figure of 46,000. The nation's unemployment rate rose to 6.1 percent, as expected. And April's originally reported 48,000-payroll drop was revised to flat. See full story.

While the employment report revealed a still-sluggish job market, it came in within expectations and did not disappoint market watchers, said Bryan Piskorowski, market commentator at Prudential. "Investors are now looking at the economic glass as half full and this has fueled the market's gains of late," he said.

The Dow Jones Industrial Average ($DJ: news, chart, profile) jumped 110 points, or 1.2 percent, to 9,152.

The S&P 500 ($SPX: news, chart, profile) rose 6, or 0.7 percent, to 996.

The Nasdaq ($COMPQ: news, chart, profile) spiked 12 points, or 0.7 percent, to 1,657. Advancers outlasted decliners by a whopping 23 to 6 on the Big Board and by 20 to 6 on the Nasdaq.

In the bond market, the 10-year Treasury note was down 5/32 to yield 3.36 percent.

Intel (INTC: news, chart, profile) jumped 4.4 percent to $22.81 as it weighed in by cutting the top end and raising the bottom end of its second-quarter sales range. The company is poised to deliver on Wall Street's expectations for its next financial period. See full story.

McDonald's (MCD: news, chart, profile) is rocketing 9 percent to $21.03 as the fast food giant said it'll spend $50 million to sell some of its hefty real estate holdings. It also clocked a 6.3 percent gain in same-store sales last month -- the biggest increase in four years. Separately, Wedbush Morgan upgraded the tech bellwether and Dow component to a "buy" from a "hold."

PeopleSoft rocked up 22 percent to $18.45. Oracle added 1.3 percent to $13.53.

Oracle's takeover bid is stoking the bulls even after the Dow hit its best close in nearly a year on Thursday.

Despite the runup, Richard Nash, chief market strategist at Victory Capital Management, said Wall Street could face a near-term correction in the area of 5- to 7 percent.  

Bullish flows data

Money is continuing to flow into stocks as the Dow and Nasdaq power to new highs for the year.

Funds investing primarily in U.S. stocks took in $3.3 billion in new money during the week ended Wednesday, as opposed to outflows of $300 million the week before, estimates Trim Tabs director of research Carl Wittnebert.

Meanwhile, international funds had outflows of $1.9 billion during the latest week, after taking in $2.8 billion the prior week, the mutual fund tracker said. Bond funds had inflows of $2.2 billion, adding to inflows of $1.4 billion

Overseas on Friday, stocks rallied in Hong Kong, Japan, Germany, France and the U.K.

In individual action among the Dow stocks, McDonald's (MCD: news, chart, profile) rocked up 7.4 percent to $20.71 on an upgrade to "sector performer" from "sector underperformer" at CIBC World Markets.

The broker cited improved near-term same-store sales momentum, a possible fourth-quarter dividend hike, a projected second-half recovery in returns on invested capital and fading Mad Cow disease concerns. Analyst John Glass upped his price target to $22 from $18.

Other Dow movers include Boeing (BA: news, chart, profile), up 1.5 percent; Alcoa (AA: news, chart, profile), up 3.3 percent; Hewlett-Packard (HPQ: news, chart, profile) up 3.2 percent, J.P. Morgan Chase (JPM: news, chart, profile) up 2.3 percent, and Walt Disney Co. (DIS: news, chart, profile) up 2.2 percent.

In recovery mode, Johnson & Johnson (JNJ: news, chart, profile) lifted 2 percent after Raymond James upgraded the medical products company to "market perform" from "underperform."

And 3M (MMM: news, chart, profile) added 1.7 percent to $127.75 after Smith Barney upgraded the stock to an "outperform" from "in line."

Sector action

In sector action, airlines (XX:$XAL: news, chart, profile) rose 3.3 percent; Biotech ($BTK: news, chart, profile) gained 3 percent; computer software ($GSO: news, chart, profile) jumped 4 percent; Internet stocks ($IIX: news, chart, profile) rose 2.4 percent. The financial sector rallied with the Amex Securities Broker Dealer Index ($XBD: news, chart, profile) adding on 2.4 percent. Chip stocks ($SOX: news, chart, profile) rose 2. 4 percent.Steve Gelsi is a reporter for CBS.MarketWatch.com in New York.

[Ernest_at_the_Beach]

Looking good for the 2004 reelection of President Bush!

[Ernest_at_the_Beach]

Need a Bullish headline in the breaking news column!

[ambrose]

this is old news. market did a full reversal and is down now. will probably be down on Monday. hopefully you've got some cash ready for dip buying.,

[ST.LOUIE1]

BUMP!

Excellent post, Ernest!

[MonroeDNA]

WE'RE ALL GONNA DIE!!!!!

[MonroeDNA]

Thanks for the post, Earnest!

[Grampa Dave]

Well the Germany economy ain't bullish. In fact it is about as bad as it has been since 1945!

http://www.freerepublic.com/focus/f-news/924391/posts

German financial crisis 'worst since 1945'
Financial Times ^ | June 06 2003 | Hugh Williamson


Posted on 06/06/2003 9:41 AM PDT by knighthawk


Germany is in danger of breaching the European Union's budget deficit rules next year because of the country's "worst financial crisis since 1945", finance ministers from Germany's 16 federal states said yesterday.

The warning reflected heightened concern over the country's severe financial problems, following indications by Chancellor Gerhard Schröder on Wednesday that Germany might overshoot the 3 per cent budget deficit limit, for the third consecutive year, in 2004.

[LS]

Hey, all of Europe sucks. That's socialism for you.

[Orangedog]

Let's hope that this latest bubble doesn't burst befor the election, because earnings of a lot of these companies can't support these share prices:

Intel has a P/E of 47
Oracle P/E 34
Disney P/E 41

3M looks a lot better that those with a P/E of 24 and Johnson & Johnson's P/E at 21, but even those are little on the higher side for what is typical if the street is going to try and claim once again that the bear market is over.

[CPT Clay]

Daschele is deeply saddened.

[Steven W.]

those are trailing earnings, of course, coming out of depressed economic + market conditions, it's a classic replay of every economic downturn that has ever occurred in the history of the US economy. For example, INTC will likely earn $1 per share next year so it's currently trading around 20 times forward earnings. However, with significant cost-cutting and productivity measures already under the belt, future increases in revenues for good companies will go directly to the bottom line and profits will rebound significantly, as they always do & always have, throughout history, following a downturn of these sorts. That said, one can justify paying 20 times trailing earnings for a company of the quality of JNJ, a company whose prospects are so great it was just downgraded because demand for their new drug coated stents is so high analysts are afraid they can't meet the demand and their only real competitor was just forced to pay JNJ $500 million for violating their province (not to mention a company which has significantly increased dividends year after year for a long time and likely promises to continue more of the same in light of the new tax incentives). So one has to put all these kinds of things in perspective.

[Steven W.]

S&P 1000 & DOW 9200 were always considered points of resistance so it's not surprising that the market saw some folks engage in profit taking & for the bears to increase their shorts in a futile attempt to try and minimize their regularly increasing losses. As for your comments on a "full reversal", I'm not seeing it & my t/a tells me the upward trend was maintained and the persistent backing & filling we're once again seeing, just like at resistance faced around DOW 9000, will be shortlived, though these kinds of pullbacks are certainly healthy & desirable.

[wardaddy]

A forward 20s P/E in such a low interest rates environment looks fine to me.

[wardaddy]

Another nice post Steven!

Volume has picked up as of late across the boards...a good sign in an up market...this is not light buying with no sellers this time.

The 50/200 MAs are trying to make the turn...the 50 is already headed north and the 200 is slowly making a left turn too.

I see foundation building here baring a terrorist attack. We will have a pullback...at some time soon. I'd venture we've still got another 100-300 DOW points before we take a hard hit.

I'm going on record here: This is not a bear rally...at least not like the run-ups we have seen since 9-11 in my view.

Again, for a simpleton like me...I'm watching the volume...the momentum.

[Ernest_at_the_Beach]

Love it!

[SierraWasp]

"Hey, all of Europe sucks. That's socialism for you."

Ah yes... The Franco Germanic you'reopeein axis of socialist punk weasals!!!

You da MAN!!! (ha ha ha!!!)

Thanks Ernesto!!!

[SierraWasp]

2:17PM Dow again in triple-digit advance by Julie Rannazzisi

The Dow Industrials ($INDU) again posted triple-digit gains, swelling 104 points, or 1.2 percent, to 9,145 after rising as much as 174 points at its intraday peak. The blue-chip index's best performers included McDonald's, which climbed almost 10 percent, Intel, Boeing and Alcoa. The Nasdaq Composite ($COMPQ) also resumed its upward trajectory, putting on 7 points to 1,653 after a brief stint in the minus column.

Take that, ambrose!!!

[NeoCaveman]

Daschele is deeply saddened.

Forget deeply saddend, he's going to need to be put on suicide watch.

[Ernest_at_the_Beach]

Yahooo!

[Straight Vermonter]

IBM is a bargain at P/E of 26. They will have a hot new server coming out this fall that will kick a$$.